AUS: Metcash earnings rise on fresh grocery, private label

Australian wholesaler Metcash has seen first-half earnings before exceptional items rise 13%, lifted by increased sales of fresh fruit, vegetables and meat.

Profits rose to A$97.3m (US$62m) in the six months to the end of October, up from A$86.2 posted for the comparable period of last year.

However, net income for the first half fell 7.2% as the company took an A$17m hit after abandoning hedges on interest rates. Metcash scrapped the hedges after interest rates were cut worldwide in an attempt to lower the cost of borrowings.

The company saw revenues rise after IGD, the group's distribution unit that supplies independent retailers, added a number of product lines, including fresh produce, meat and bakery products.

Wholesale sales increased 9.8% during the six months, rising to A$3.19bn and wholesale EBITA totalled A$146.5m, up 13.2%.

In a presentation accompanying the group's announcement, CEO Andrew Reitzer said Metcash was increasing its focus on "fresh and private-label brands" in order to strengthen IGA retailers' consumer offer.

Reitzer also emphasised IGD's "strong focus on retail execution and "local" market positioning" and "ongoing supplier investment and aggressive price promotions" in order to help the company's retail customers compete with Woolworths and Wesfarmers' Coles, Australia's two largest supermarkets.

"Despite strong competition from the two dominant chains, our market share has held steady," Reitzer said. "Each of the Metcash businesses primarily sell everyday necessities and are therefore in a good position to maintain growth in volume and profitability for the second half."

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